Don’t Donate Your Points to Support Tornado Victims!

Mommy Points offers a nice roundup of opportunities to earn points donating to charities that support disaster relief, as well as opportunities to redeem your points for charitable donations.

By all means review the list, perhaps it will inspire you to be more charitable than you otherwise would have been.

At the same time, it’s worth considering the ethics and efficacy of small mileage-earning donations.

  • Is it ethical to earn miles for your charitable donations?
  • Is that even charitable?
  • Will your donation actually benefit any of the causes that you think they will?

Earning Miles for Donating to Charities that Partner With Frequent Flyer Programs is Probably Ok

If a charity that you believe does good work also earns points for your donation, consider that — especially if it’s a charity that partners with the frequent flyer program you’d be earning with.

In that case you can assume that the miles you’re earning are being provided by the program itself as a way of generating contributions for the airline or hotel chain’s favored cause, or at least that the points are being provided at a substantial discount.

Donating to a Charity That is Buying Miles is Probably a Waste

If you’re going to be earning points for a donation to a charity with no obvious connection the program then it’s highly likely that the charity is purchasing the miles to rebate to you as a marketing expense. They’re ‘paying to acquire you as a donor.’

The bet is that they may not be making money on the acquisition campaign, they may even be losing money. But they expect to be able to re-solicit the people who give, and a meaningful percentage will give again. It’s the likelihood of future gifts that makes it profitable to buy miles to give to donors as part of a new donor prospecting campaign.

Put another way, your small donation is really paying for the organization to market to you in the future rather than funding current relief efforts.

That’s the reality of small donor fundraising — it makes sense for the organization to invest in finding donors, since someone that gives once is part of a pool that’s highly likely to give again. And it’s the stream of future contributions that are profitable to a charity.

But how does that make you feel about your gift, if the charity actually loses money raising the donation from you?

Maybe it makes sense, you earn miles while introducing you to a charity and inviting them to market to you going forward. Even if you think you won’t give again, statistically you are reasonably likely to (How well do you know your future self? Perhaps not as well as the charity’s data analysis does). In that case it’s your future charity that’s noble, consider the mileage payment quid pro quo and even a pre-commitment device for the good you will do later.

Donating Your Miles in Exchange for Cash to a Charity is a Bad Deal

The value per point is very low. Just like redeeming points for merchandise is costly to a frequent flyer program and so the value you get tends to be pretty low, turning points into cash for charities is similarly costly. While I can easily get 1.5 cents or more per Hyatt Gold Passport point when I redeem for a room, they’ll only credit 0.5 cents per point when donating to the Red Cross. Priority Club only gives 0.4 cents per point. Hilton only 0.25 cents per point.

The amount the loyalty program gives may not even increase. When giving to a charity that the program is contributing to as well, the total amount gifted may not increase as a result of your donation. They usually commit a certain amount of cash and will probably give it whether you redeem your points or not. That’s true even with matching gifts, either because they’ll still make the gift even if their members don’t donate or because the matching amount is fairly small and with a large program the total available match will likely be exceeded by total member giving.

In some cases it may even save the loyalty program money. With low per point values when redeeming for a charitable donation, it may cost the program less to redeem for the gift than to redeem for travel. When hotels are full, most hotel programs pay the property nearly its full average daily room rate. In contrast, redeeming for a charitable gift gets points off the books on the cheap.

Instead of redeeming miles for a charitable donation, consider redeeming your points for travel and using the cash saved (by not paying for the trip) for charitable giving.

Since you’re likely to do better than half a cent per Hyatt Gold Passport point or a quarter of a cent per Hilton point, this means you’ll be freeing up more cash for charity than working through the loyalty program.

What’s the Most Effective Way to Give?

Recognize that the amount you give ‘for storm relief’ isn’t likely to actually go to storm relief. Charities are mobilized now, they’re drawing down existing resources, in most cases the best case scenario is that you’re likely replenishing resources to be used for a future disaster.

That’s good — but it’s not the story you’re probably telling yourself about what you’re accomplishing.

If you’re a relatively small fish in charitable giving, consider:

  • Giving to one charity is a more efficient use of your money than giving to several. There are fixed costs to process your gifts, including data entry and receipting/acknowledgments but especially followup informational mailings to you and subsequent donation requests. Each organization you give to multiplies out those costs. Giving to just one charity means the fixed costs are contained, with more marginal dollars spent on the purpose you care about.

  • Don’t believe what you see on ratings sites like Charity Navigator. Non-profits game the numbers, and ratios derived from non-profit tax returns often give the opposite picture of a charity’s financial stewardship from the reality of how they run their business.

  • You’re better off not monitoring the effectiveness of your giving anyway. Monitoring is costly, not worth it if your gift is small. And you’re probably giving to feel good. If you find your gift isn’t as effective as you thought, you’ll probably give less.

  • You should probably give more than you do. Pick a percentage of your income and stick to it. Tell other people about it, and the specific cause that you’re supporting, as a commitment mechanism.

  • Or just give away your money later, rather than now. It’s how Benjamin Franklin, whose estate was worth a pittance, wound up as a $7 million donor.

    [I]nstead of donating money to charity, you should invest the money at compound interest, then donate it to charity later after your investment has paid off… the real rate of return on investment has been higher than the growth rate for 3000 years and this pattern shows no signs of changing. If you donate the money today, your donation grows with the growth rate, but if you invest it, it grows with the interest rate.

But if you wouldn’t otherwise give but-for the miles, and the opportunity introduces you to charitable giving there’s a chance you’ll continue. And so while that’s certainly a second-best, it’s better on the whole for society than if you weren’t being charitable at all.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. But Gary, it FEELS. SO. GOOD. to think you’re actually making a difference when in reality you’re not.

    And it, FEELS. SO. GOOD. to put up links telling everyone else how to donate even if their donations won’t make a difference either.

    Thanks for telling it like it is. No spin zone.

  2. Hey Gary…it’s not unpopular for you to post this, but you are a dick…I bet if the tornadoes happened in Sheboygen or whatever miserable corner of America you happened to come from…I bet that you would be more supportive….jerk…

  3. This post is all about how to give more, and give more effectively — and why if we want to help, mileage deals may not be the best way to do it. But thanks for sharing your opinion!

  4. Wow, theblakefish, take a chill pill. He’s simply saying its not a good deal. Instead, buy yourself an award ticket or book a hotel award night and gift the money saved directly to the charity. A sound decision that helps the charity with a cash infusion.

  5. I don’t disagree at all, but I do think in a miles and points community that many of us have spare miles or points we don’t have anything better to do with than donate to some cause, and/or many can be motivated by miles when they otherwise might be on the fence.

  6. Wow, you can change 10K Hilton points into a $25 donation. I’m getting about $250 value for the same number of points at the Hilton Bora Bora. Why does it seem like the points and miles donation side is just a cheap way for the companies to get points off their book.

  7. Isn’t it also true that United/Delta/AA et al. redeem donated miles at the standard level (not saver)?

    So if you would NEVER redeem for a standard award, why would you donate miles that are going to get redeemed at the standard level?

  8. > Don’t believe what you see on ratings sites like Charity Navigator.

    CN vets the financial health, accountability & transparency, and results reporting of thousands of different charities using a fairly transparent technique. Can you suggest a better methodology than the one they use so that I can make better donation decisions?

  9. Gary, I agree wholeheartedly.

    In response to MommyPoints’s post, I did dump some orphan Skymiles to the Salvation Army.

    But as you note, making a cash donation which earns miles likely entails marketing expenses I would not want the charity to incur – rather, I expect them to be good stewards of my donations and minimize marketing expenses.

    And I find the offers certain affinity programs make, where the member puts forth a king’s ransom in their currency in exchange for them giving a pittance to some charity to be appalling. Inducing such retirement of their currencies for a pittance is a business strategy, not a charitable act, and they should be called out.

    Simply, it is most efficient for folks to use their affinity currencies to their highest and best uses, ensuring that in the end of the day, they may also make charitable donations to an organization which will use that donation responsibly.

  10. @theblakefish, You don’t get it. The post provides helpful information with respect to deploying scarce resources to the greatest effect. Information such as this permits me and others to make wise decisions consistent with good stewardship of resourced with which I have been blessed with respect to my charitable efforts.

  11. Nice one Gary. The post itself has great info, and the title was intentionally inflammatory to get people to read it. Well played.

  12. While acquiring & spending miles/points is the theme of our viritual community, I have stopped giving thru AA to get miles. I gave a couple times to USO & now I get double mailings almost weekly it seems. Only the cable company is more persistent.

    Also be careful who u give to. They may have other motives than just helping the disadvantaged. The Salvation Army is a religious org that discriminates against LGBT Folks. If u want to donate used clothes give to Goodwill If u want to help diaster aide, give to Red Cross.

    & Thanks, Gary. I thought you were being helpful!

  13. I think you have to look at the what giving is all about? Is it about giving some thing you have no use for?( orphan miles)Is it about giving to receive some more miles. Or is it about giving some thing that has value to you and it comes from the heart with nothing in return?

  14. Even though I know it is “part of the non-profit game”, I abhor charities that take my donation and burn it on marketing. I cringe when I donate $50 and see at least $50 worth of mailings bomb my mailbox for the next 5 years. Which is precisely why I quit giving to large charities and only give locally. Maybe locals burn the money on parties or hookers or what not, but at least I don’t have to see the direct waste of funds each week/month! And, as it is Memorial Day, I’ll point out that my donation to the USO a few years ago has been wasted in the attempt at getting me to donate more. So much for a poor soldier in AFG whom I thought I was supporting. 🙁 So, give cash or lightly used household goods and give local.

  15. I’m sorry but was today Memorial Day or bust Charity balls Day? Get a grip…..a good hard grip!

  16. Great post Gary, well other than bringing out the usual internet suspects calling you names and banging on the Salvation Army.

    But even better than cash is a donation of appreciable assets, such as stock. You pay no tax on the capital gain and get a taxable income deduction for the full value of the asset.

    I do all of my giving via a Fidelity Charitable Gift Fund, Vanguard has a similar program. Many employers also have matching programs.

  17. Very informative. If one is going to donate something, then it should be out of humility and goodwill. Donating just to get something in return is plain selfish. And if airlines are charging standard award mileage point, for charity redemptions, then shame on them.

    As somebody said, cash is king, but donate miles if that is all you got.

    You discussed a subject very few people want to discuss. Great job!

  18. Gary, you said ignore ratings on sites like Charity Navigator as NPOs “game the numbers”. As someone who works for a well regarded local charity with a great CN rating, I would like you to expand on what you said and why you said it. Being close to our data and our 990 I can assure you we do not game our numbers, and I imagine most NPOs have audits, etc. to be sure they do not as well.

  19. One other factor: Charities often receive more than they need when a disaster is fresh “in the news”; but much less than needed later when the hard work of recovery and rebuilding is still going on.

    Carl – right on!! Using Fidelity Charitable Gift Fund (or another donor advised fund) as a “conduit” for appreciated assets maximizes charitable giving leverage (in my case, Uncle Sam often covers 60%; I am out of pocket 40% or less). (Or, for more substantial donations, you can give appreciated stock directly to a charity.)

  20. My ex-boyfriend donated his United and US Air points to charity, after we broke up. It thought it was the right thing to do since I maintained the account and had all the email and passwords under me. Ronald Mcdonald house was able to use those miles! They sent him a thank you letter, but I did not forward it to him since we had broke up at the time

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